Just a short comment today. Yesterday's rally and today's inaction, following what happened on Monday is just another sign of the uncertainty in the equity markets. The ironic thing is that base interest rates have remained benign. In the credit markets, bonds are getting brought to market, albeit at levels not seen in years. For example, Citi brought $4 billion 10yrs at +190, the widest spread ever for that issuer in that maturity. Yet, in absolute yield terms, it is only about 15 basis points higher that the last 10yr Citi brought in August. It is realities like this that show we are living through a manic market. Stocks will lurch from story to story and the bond market, especially anything with credit risk, will remain hostage to the uncertainty of valuations. Only in a crazy market do you see a Bear Stearns announce they are taking a charge equal to one-tenth of their market cap being viewed as a good thing. Well, at least they reduced their exposure; they claim they're net short sub prime now. I guess we should hope in doesn't rally...
PS. This blog went over 1000 hits today. Thank you!
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Yeah and more subprime and bond insurer fears drove yet another flight to safety. Bank and finance paper is looking like a buy here. However, Citi's willingness to borrow at these spreads (and over +300 on a new E-trup)indiactes that it will need much capital for significant further writeoffs.
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